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Wood panel firm Kronospan – which employs 600 workers – has fired a warning over the future of its Chirk plant with fears that biomass plants are fuelling a hike in UK timber prices.

The company says the UK has seen a 10% rise in prices in the first quarter of 2014 and that they have doubled in 10 years. This has already halted exports as the plant struggles to compete with cheaper competitors in Central and Eastern Europe.

Now there is “concern” that the UK market could be hit by an influx of cheaper imports that could damage Kronospan’s domestic market.

The firm is asking for Government action over subsidies to biomass which it blames for a surge in demand for wood and the rise in prices.

Chris Emery, timber procurement executive at Kronospan, said: “This is a big concern, certainly at managerial level there is real concern over this.

“We have seen a 10% increase in the price of round wood since the start of the year and the price has doubled over 10 years.

“The recent rises have thrown us because it had been a mild winter and we did not expect the biomass demand to rise so strongly.

“It is the small scale operations that are a concern because it is hard to keep track on them.

“We need to speak out about this now and Government needs to take action, we need action to keep it viable.”

He said a combination of biomass and the growing house building market is now causing the problem.

He added: “This (price rise) is because of the increase in demand for timber for use in biomass because of the subsidies that have been on offer.

“This has been around over a number of years but it is now that we are seeing sharp increases in prices because of the upturn in the housing market.

“We have had to be more efficient and at present we can still compete on price in the Uk market but over the last two to three years our export market has gone because we could not compete. This had been 10% of our business.

“We are still holding up in the Uk but there are concerns over imports, especially from Eastern Europe where costs are lower. It would only take a change in the exchange rate to see an influx of imports to the UK. That would have a major impact on us.”

Kronospan believe that biomass subsidies should be for end-of-life wood, wood that can no longer be used for anything else.

The firm are themselves investing in a biomass facility for recycled wood fibre rejected from the manufacturing process, bark stripped from logs, and dust and fibre not used in the manufacturing process.

The Wood Panel Industries Federation has consistently stated that subsidy regimes biomass energy are distorting wood markets and should be removed

Current subsidies have led to an unfair advantage for large-scale wood fuelled power generators and potentially a threat to the wood panel industry’s UK operations by driving up costs, according to the WPIF.

Wood panels, a vital component in the construction industry and in furniture manufacture, are produced from virgin and reclaimed wood – the same materials which biomass energy plants are being incentivised to burn by Government subsidies.

Clwyd South MP Susan Elan Jones MP has called for the Wales Office to act directly to help Kronospan.

She said: “Kronospan is massively important. It has a thriving apprenticeship programme supported by the Welsh Government, teaching young people real-life employment skills.

"Kronospan and I are concerned by various incentives in the Government’s renewables obligations and the new Energy Act 2013 to purchase wood for energy generation.”

A departmwent for Energy and Climate Change spokesman said: “

“We take this matter seriously and our analysis has shown there is enough wood available to cost effectively meet the needs of both the wood panel plants and for the biomass projects we expect to come forward for support.”